How Rand Paul whiffed on Marco Rubio's child tax credit

One of the few highlights of Tuesday's Fox Business Network debate was a testy exchange between GOP presidential candidates Rand Paul and Marco Rubio on one of Rubio's signature proposals: dramatically expanding the child tax credit. This policy has been championed by a group of right-wing intellectuals known as "reform conservatives" (I count myself among them) who believe one of America's most serious social pathologies is the breakdown of the family, and the GOP's biggest political problem is a lack of focus on middle-class priorities.

Paul, however, was not a fan of what Rubio dubbed his "pro-family tax code."

"Marco, Marco," the Kentucky senator said. "How is it conservative to add a trillion-dollar expenditure for the federal government that you're not paying for? ... You cannot be a conservative if you're going to keep promoting new programs that you're not going to pay for."

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The Paul-Rubio exchange is very illustrative of a wider debate on the right — one between libertarianism and conservatism. And make no mistake: Paul is wrong. He attacked Rubio's proposal as a form of welfare. It's not.

"How is it conservative," Paul asked, for the government to write checks to people who have kids? Well, first off, there are two types of tax credits: refundable and non-refundable. A refundable tax credit means that if the credit is bigger than your tax liability, the government writes you a check for the difference. A non-refundable tax credit means that if the credit is bigger than your tax liability, your tax liability disappears, but that's it. You don't get a "refund" for the rest of the tax credit.

Rubio's tax credit is partially refundable. It nets out your tax liability, crucially including payroll taxes, but no further. Rubio got criticized for that from the left, for supposedly leaving the poor in the cold (The idea being that if you're not working, you don't have payroll taxes, so can't benefit from this credit). Now he's getting criticized from the right for being refundable in any way at all. This sort of dynamic is often the mark of a clever idea, and this tax credit actually encourages work (if you're paying payroll taxes you're working) and helps lower- and middle-class families with small income tax liability who wouldn't benefit so much otherwise. It's actually a great feature of the policy.

Rubio's tax credit is not an entitlement, or a handout, or welfare. It's a tax cut. If people get a check from the government, it's as a refund for taxes they've already paid. The idea that a tax cut is a handout, which presupposes that money is the government's to begin with, and anything the government deigns to leave you with is a gift, is an idea found on the fringes of the left, not on the right. Conservatives believe that your money belongs to you. So it's strange for Paul to take this line of attack against Rubio.

Now, you might criticize Rubio's plan for other reasons. Maybe you think it's a form of social engineering. Well, that's wrong too. And on Tuesday night, Rubio was rightly unapologetic in having a pro-family, as well as pro-growth, tax plan.

Conservatives believe strongly in individual liberty and natural rights, but that is not the only thing we believe in. We also believe in protecting natural institutions that serve human flourishing, including individual liberty, but also including the family, communities, subsidiarity, and so on.

The family has been the victim of social engineering. As reform conservatives often point out, entitlements like Social Security and Medicare create a disincentive to have children, since parents pay for old-age entitlements twice — by paying taxes, and by paying to educate future taxpayers to fund those entitlements. More generally, liberal elites, through experimentation with social norms — aka the Sexual Revolution — have created for many people a dystopian landscape of family breakdown.

Unlike progressive policies that always seem to lean in one direction, the child tax credit is not paternalistic. Some mothers want to work less to spend more time with their kids, and will use the tax credit to do that; other mothers want to focus on their career, and they will use the tax credit to outsource childcare.

Founding a family, and sticking with it when times are tough, is not a "choice" made in a vacuum. It is a choice, yes, but one that is made more or less likely by countless social factors, incentives, cultural narratives, and so on. And elites, policy as well as cultural, have contrived in countless ways to make family formation much harder.

To try to make the game slightly less rigged against family formation, to help make it easier for millions of families to raise kids, is one of the most authentically conservative — and just plain good — policies we can promote.

Rand Paul is wrong. Let's hope those who agree with him lose the debate within the Republican Party.